KUALA LUMPUR: Standing in front of the board of Glenealy Plantations (M)
Bhd at the court convened meeting (CCM), minority shareholder Cho Kwai
Lin told other shareholders who were present to cast their vote that the
company’s privatisation exercise was “the sale of the century in
Malaysia”.

“If I may be allowed to say so, it is the rape of the century on the
minority shareholders,” Cho said in her speech which was read at the CCM
and made available to reporters.

Cho told other minority shareholders that the offer price of RM7.50 per
share essentially values Glenealy’s plantation sites at a book value of
RM25,000 per hectare.

“This is a discount to the estimated RM36,000 per hectare which Glenealy
paid for a tract in Indonesia”, she said, referring to figures from
analysts’ reports.

At RM36,000 per hectare, Cho argues that Glenealy shareholders should be
entitled to at least RM10.26 a share under the privatisation. She said
should major shareholders insist on taking over Glenealy, the offer
price “should be not less than RM10 a share and that the company’s
entire cash pile should be entirely distributed to shareholders”.

“For all the above reasons, I stand here to call on all minority
shareholders present today to join me in voting against the resolution
in its present form,” she told those at the CCM.

Nonetheless, the controlling shareholder, Samling Strategic Corp that
held 53.68% equity interest in Glenealy, garnered enough votes to take
over the company at RM7.50 per share.

Analysts noted that Glenealy’s board declared a special dividend of
52.75 sen per share two days before the CCM. This might have to some
extent have helped convince some minority shareholders to accept the
offer as the dividend narrowed the value gap. The CCM lasted for about
four hours at the Prince Hotel.

Some disgruntled shareholders were voicing their dissatisfaction to the
media. Shareholder Lim Thian had asked why wasn’t there a valuation
report for the plantation land owned by Glenealy.

He said having a valuation report is crucial to ensure shareholders get a
fair price for the privatisation of the firm. He said the estimated
RM25,000 per hectare for the company’s tracts significantly undervalues
the company based on previous transactions involving other plantation
firms.

“If there was a valuation report on the deal, shareholders will most
likely not approve the proposal. “This is material information but Bursa
Malaysia and Securities Commission have not said anything so far,” Lim
told reporters.

Minority shareholder Leong Lau Chew, 71, was outside the hotel ballroom,
where other shareholders had deliberated and the voted on the proposed
privatisation yesterday.

Leong, a seasoned investor, said he did not want to attend the meeting
as he was unhappy that the unfair privatisation offer price would deny
the minorities’ opportunities to ride on the company’s future growth. “I
don’t want to go into the meeting … I’m afraid I will probably shout
[at the board].

If the company is not good, why would the major shareholders want to
privatise it?” Leong told The Edge Financial Daily while the CCM was in
progress. He said Glenealy should remain listed as investors like him
had enjoyed dividends from the company all these years.

When it is taken private, minority shareholders would not be able to
reap the gains from Glenealy’s future expansion plans. Leong is one of
the many disgruntled minority shareholders of Glenealy who had opposed
the privatisation exercise as they viewed the offer price of RM7.50 per
share undervalued the plantation company.

The value of its parcels of plantation land has not been appraised since
1998. The offer price values Glenealy at RM865.2 million, which works
out to about RM16,067 per hectare.

Independent adviser Hwang-DBS Investment said in a circular to
shareholders that Glenealy’s implied enterprise value/planted area of
RM23,628 per hectare is below the average of RM39,261 per hectare among
comparable companies but still within the range of RM18,380 and RM54,940
per hectare.

As the meeting was ongoing, some shareholders walked out without voting
on the proposal as some felt that the RM7.50 per share offer price does
not reflect the true potential of the company.

Some contended that whether they cast their votes or not, the company
would still be taken private by major shareholders. The shareholding in
Glenealy was fragmented.

The pass on the resolution on the privatisation exercise once again
indicates that a concerted effort by all the minority shareholders is
still a rare occurrence in Malaysia corporate scene.

This article is appeared in The Edge Financial Daily on 14 September, 2012.

1 comments:

This is indeed a sad day for small time malaysian investors. How many times have we seen minority shareholders getting bullied out of their wonderful investments in the last decade? Smart business owners are taking advantage of every cyclical and temporary undervalued situations of their own common stocks. Minority shareholders should really be given more protection in this market. All of such cheap privatizations are perfect case studies for the topic - "The Perils of Value Investing in Malaysia". It is not difficult to spot undervalued and well managed businesses in Malaysia. The greatest challenge for investors is placing your trust on the controlling shareholders for not ripping you off during market downturns for their own good.